Category Archives: Running Your Business

Getting Started, Running Your Business

Moonlighting Tips

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Moonlighting TipsIt can be a challenge to start an online business while you keep your day job. At times the process could feel like a juggling act; you’ll need a lot of energy and determination.

The general rules for starting a company while you keep your day job might seem like common sense, but some of these items can be easy to overlook and dangerous to ignore.

  1. Get a decent smart phone with an inexpensive plan. Keep this phone completely separate from all day job activities and don’t share the number with anyone at your day job. Set the phone to vibrate, not ring, when you receive calls and emails during the day. Prepaid Android* smart phones with generous data plans are currently available for around $50 per month, plus the cost of the phone.
  2. Set up a primary customer service email address through your web host, carefully choosing one primary address for customer service inquiries (like ‘service@example.com’). Configure your web host control panel to forward those emails to your smart phone.
  3. Rent a mail box service close to your home that offers addresses that don’t look like drop box numbers. Ideally the store can give you an address like “100 Main Street #1103” and not “100 Main Street, Box #103.” This helps you avoid looking like a tiny company online, and it prevents the rare problem customer from showing up at your home. Expect to pay around $100 per year in most areas to rent your drop box.
  4. Never publish your home address on your website for your own safety. The moment you do, web directories will capture that address and publish it online forever.
  5. Get an inexpensive toll-free number to publish on your website, and forward those calls to your smart phone – at least to start. You might not be able to answer calls and emails right away, so respond to the most urgent  messages during daily breaks from your day job. Answer every inquiry as soon as you can, and in every case within 24 hours. You can get a toll-free number starting at around $10 per month.
  6. Tell no one at work about your second career if you’re a salaried employee, and also avoid telling anyone who is even a casual acquaintance of your co-workers. Humans are naturally jealous, and you could quickly find yourself fired if you tell the wrong person.
  7. Keep online social networks separate, using care to never discuss your moonlight career on any of your personal social networking pages.

With some hard work and luck, your business will grow to the point where you can no longer handle all of the work and still keep your day job. Surprisingly this doesn’t mean that you have to quit your day job… if you find the right outsourcer.

Next we’ll talk about tactics to grow your business at a reasonable cost.

Next: Keep Starting Costs Low

* This is not a paid endorsement.

Getting Started, Running Your Business, Your Website

Set Up Your Website (1)

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Set Up Your WebsiteWebsite Basics

When starting your first online store, it’s usually best to start simple and keep your costs low.

It makes little sense to hire an expensive web designer – or to sign up for an eCommerce service with high monthly costs – until you’ve proven that you can sell your first products and keep your customers happy.

What Is a Website, Really?

  • Sometimes a website consists of static pages that are similar to the pages you create with a word processing program. Although it’s not recommended, you could create a home page by typing a few lines in Microsoft Word and saving the document as index.html in the web folder you can access in the control panel of the web host that you chose when you registered online.
  • Instead of a word processor, professional website developers more often use Web development software. While this approach can provide a great deal of control, as described in the next article it can be very difficult to learn.
  • Today many websites consist of pages that are displayed on-demand by a content management system (CMS). The CMS gives you an easier way to create and organize your web pages, and uses a database to store the information. As described in the next article, we use a free CMS called WordPress for this website, but you can also pay an eCommerce service a monthly fee to host your website and give you their own CMS.
Online Store Diagram
Three Parts to Your Online Store
(Click to Enlarge)

What Makes an Online Store?

In addition to a working website, your online store will also need:

  • Shopping cart software that lets customers choose the items they want to buy and calculates shipping, tax, and any other costs.
  • A payment gateway that securely accepts payments and temporarily holds the funds in an account called a merchant account.

This chart shows some of your options, including software that you can install yourself and services that suppliers can host for you. We’ll explore these options the next articles, starting with alternatives to set up your website.

Next: Choose How to Set Up Your Website

Running Your Business, Your Money, Your Website

Choose How to Get Paid

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Choose How to Get Paid

After you’ve decided on a shopping cart, you’ll need to choose a payment gateway (sometimes called a payment provider) that securely authorizes and charges customers’ payment cards, temporarily holds the funds in a merchant account that’s part of the service, and sends you the payments less transaction fees.

Examples of payment gateways include PayPal, Authorize.net, Chase Paymentech, and Sage Pay.

Choosing a Payment Gateway

Your choice of payment gateway is critical to your business because:

  • Different services charge very different transaction fees (bases on percentages of funds collected and sometimes the payment cards used), plus possibly recurring fees that could be charged each month, regardless of how much you sell. These differences can amount to a great deal of money once your business starts to grow.
  • It’s important to choose a payment gateway service that resolves your issues promptly, consistently, and fairly. We call our payment provider about customer issues and technical support at most around once per month, but since many of those calls are urgent as far as customers are concerned, we depend on prompt and reliable phone support.
  • Your payment gateway must communicate securely with your shopping cart to protect both customer data and your money. Just as importantly, the service should have processes to resolve (hopefully rare) cases of customer fraud as painlessly as possible, along with controls to prevent criminals from accessing your account online. We’ll discuss the controls used by our payment provider in the next article.

Choose Your Payment Gateway with Care

As with the other key parts of your online store, you should compare and choose your payment gateway carefully since the choice will have a big impact on your business and could be difficult to change as you grow.

Beware of the add-on fees charged by some services that advertise low transaction costs. These fees can include surcharges on some types of payment cards, monthly reporting surcharges, and even termination fees.

As always, treat online review sites with suspicion, as many of the comparisons I’ve read on these sites don’t seem to give an accurate picture.

I’ve personally tested only the PayPal Standard* service that our store used for the first few years, the PayPal Payments Pro gateway that we use now, and the (now defunct) Google Checkout service. Therefore I can’t give first-hand advice about other services.

Our experiences with PayPal have been very positive, but we’ve learned some secrets in dealing with PayPal that were important for our business.

Next: PayPal Secrets

 

* This is not a paid endorsement.

Running Your Business, Your Website

Look Bigger than You Are

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Look Bigger than You AreTo be successful your online store needs to inspire confidence in each visitor. Since you’re probably starting as a one-person company, this really amounts to looking bigger than you are online.

The challenge is for your website to show as much of a big-company image as possible, while keeping starting costs low. Fortunately you can inspire confidence by attention to detail as you develop your website, and through a few basic investments.

Look Big Online

Many of the essential steps to help make your company look trustworthy online are discussed in other articles, and are summarized here.

  • Choose a memorable, professional-sounding website address, as discussed in our article about getting the right company name.
  • It can be easier to give your website a modern, clean layout if you choose the right content management system (CMS), as noted in the article about how to set up your website.
  • Use consistent, good quality images that you create or license, as noted in the article about website legal stuff.
  • Publish a toll-free number on each page of your website, as described in the story about focusing on customer service.
  • Get the right sort of mail box address to publish on your website, as told in the article about moonlighting tips.
  • Be on the lookout for customers’ frequently asked questions so that you can provide the answers on your website, as noted in the story about customer service.

Here are some other suggestions to consider.

  • Use a professional designer to create a company logo for your website. If you search for freelance logo designers and browse for portfolios that you like, you might find a good designer to do the work for $100 or less.
  • As you develop your website, get feedback about its usability from friends who don’t work at your daytime job.  A simple book about website usability, written by Steve Krug*, has some good advice.
  • Carefully check for grammar mistakes, misspellings, and broken links before publishing any web page.

As your business starts to grow, it can be helpful to publish customers’ product reviews on your website. Some of the shopping carts mentioned in our previous article provide this feature at no additional cost.

Next, we’ll talk about more strategies to grow your business.

Next: Grow Your Business

 

* This is not a paid endorsement.

Running Your Business, Suppliers-Good and Bad, Your Money

PayPal Secrets

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PayPal SecretsIf you search online for the phrase “PayPal sucks” you’ll find discussion board comments and even entire websites with bad things to say about PayPal.

Many of the complaints seem to suggest that PayPal freezes funds and even shuts down the accounts of honest merchants for completely unfair and arbitrary reasons.

Reading between the lines, I suspect that a lot of these complaints come from individuals whose business practices have problems that PayPal’s aggressive customer service controls have exposed.

To put it another way, I believe that if you deliver an honest product with good customer service you’ll find that PayPal doesn’t suck*. From our perspective, PayPal is one of the most reliable online services that we use.

PayPal Standard Buy Now Button
PayPal Standard
“Buy Now” Button

Why PayPal?

When starting our first online store, I chose PayPal Standard, a combined shopping cart and payment gateway, because of its simplicity. This service allows you to start collecting payments by pasting a few lines of HTML code on your web pages, following instructions on the PayPal website. You’ve probably seen PayPal Standard “Buy Now” buttons like the sample shown here.

Since that time our website has changed a great deal, but PayPal is still collects our payments. Although we’ve moved to a more flexible service called PayPal Payments Pro, many of the core advantages are unchanged, including:

  • Competitive transaction fees, that get smaller as your sales volume grows, and the ability to accept many different customer payment cards
  • A lack of hidden costs such as extra fees on rewards cards, statement fees, and so on
  • Aggressive security controls to prevent hackers and an occasional dishonest customer from taking your money
  • Integrated UPS and USPS shipping that automates your shipping labels and provides proof of fulfillment in case of any disputes
  • A history of good telephone support, by staff that seems to be US-based

But despite these positive points, we had to discover some critical, mostly unwritten rules to keep things running smoothly.

Secrets to Trouble-Free PayPal Service

Many of the most important secrets for working with PayPal didn’t seem very obvious at first. We had to learn some of these through experience.

  • Make the email address for your PayPal account your primary customer service address, since buyers will see the address when PayPal confirms payments and issues refunds. Choose an email address that’s simple and will make sense to customers, like service@Example.com.
  • Document all customer requests that impact fulfillment (for example shipping address changes) and use integrated PayPal shipping to help prove you shipped every order.
  • Avoid accessing your account from a new location without notifying PayPal beforehand, as this could trigger a security lockout.
  • Once you add employees, configure additional PayPal logins to prevent others from viewing balances, transferring funds, and so on.
  • As soon as your account balance is big enough that loss of funds would be a disaster, enable the PayPal Security Key that uses a cell phone or smart card to authenticate any login that’s allowed to withdraw money. Use of your mobile phone as a security key is free to US customers.
  • Most importantly, treat customer satisfaction as your top priority. Answer questions and complaints quickly, and do everything in your power to focus on customer service so that no one ever ever needs to contact PayPal or their payment card issuer to dispute your charges.

PayPal Shortcomings

All online services suffer occasional outages, and PayPal is no exception. In our experience PayPal disruptions have occurred less than once per year, and are usually resolved within a few minutes of calling their support line.

Our biggest frustration with PayPal used to be its transaction reporting. We find these reports difficult to use since so many of the entries are temporary, behind-the-scenes transactions like authorizations, holds and reversals. These related, temporary transactions often span consecutive months so they’re difficult to reconcile, and they’re so numerous that they bogged down our accounting software. We found no reliable way to import the transactions into QuickBooks, and the add-on tools we tried only made things worse.

After years of frustration we finally found a great accountant who taught us how to solve the problem. For details about the simple way that we now get the financial results from PayPal into our accounting software, see our story about QuickBooks Hell.

What’s Next?

Once you’ve configured your website and chosen your shopping cart and payment gateway, if you sell physical goods you’ll need to determine the shipping options you’ll provide customers. We’ll discuss that next.

Next: Shipping Your Products

 

* This is not a paid endorsement.

Running Your Business, Serving Customers

Problem Customers

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Problem CustomersEarly on you’ll start to encounter occasional problem customers. Your fair and courteous treatment of difficult situations will help establish your online reputation and could have a big impact on your job satisfaction and peace of mind.

Real ‘Problem Customers’ Are Rare

In nearly all cases, customers who seem combative, irrational, or even dishonest are really normal people who are under unusual pressure or are having a bad day. It’s important to put yourself in the position of your customer, never assume that people are being dishonest until there’s real proof, and ask yourself whether their communication could be justified under difficult circumstances.

In our business we’ve found only about one individual in 5,000 to be a real problem customer. However, this can definitely be influenced by the type of products you sell. For reasons described in my article about Good vs. Terrible Product Ideas, I encountered far more problem customers when I ran a different category of online business. Since dealing with problem customers can be a big source of frustration, you should consider this possibility as you choose your product idea.

Here are guidelines I’ve learned for different types of difficult customers.

  1. Good people who are having a bad day really aren’t a problem at all, and will comprise nearly everyone who at first seems irrational or confrontational. These individuals might, for example, have an unusually urgent need for your product or be unsure about the safety of shopping online. It’s important to respond to these individual quickly, with the utmost courtesy, in a way that assures them you’re honest and fair.
  2. Truly abusive customers are rare, and will usually make themselves known early-on. An example of abusive behavior is to demand a big discount and to imply a threat or use profanity if you don’t agree. Once an individual displays abusive behavior, your best option is to to communicate with courtesy and respect but to avoid making the sale. If the individual is already your customer you’ll be tempted to refund the purchase in hope of ending the abuse. However we’ve found that combative customers can continue to cause problems even after you’ve refunded their money and let them keep the product for free.
  3. Self-destructive consumers are rare but can be a big concern. With improper use almost any product can cause injury or financial loss. If you receive a communication from anyone that suggests they might use your product in a harmful way, always explain the potential outcome in clear and explicit terms. If the individual seems determined to proceed, do everything possible to avoid making the sale.
  4. Customers who commit outright fraud are rare, but require you to always be meticulous in your record keeping. Fortunately a good payment processor can prevent your dealing with the vast majority of cases where, for example, someone claims that they’ve never bought your product. In cases where an individual says that your product was bought but never delivered, we’ve found that while UPS isn’t perfect overall, they have been very reliable in either issuing an insurance payment or, after investigation, getting the customer to admit a mistake.

In every case, your best option is to communicate with respect and recognize that email can be dangerous if you’re not careful with your communication.

Next: Email is Dangerous

Getting Started, Running Your Business, Tips for Your Business

Grow Your Business

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Grow Your Business

Once you start to sell online and prove your product idea, you can help your business grow by following some simple advice from a really smart CEO at a company where I once worked.

This CEO is unusual because he shares so much information about running a company with his workers. It’s no coincidence that so many of his former employees now run businesses of their own.

Here is a key piece of advice that the CEO told us about running a business.

A CEO really has only two jobs:

  1. choose a small number of real priorities to focus on right now, and
  2. find and retain the right people to work with.

This concept sounds simple, but it can be a real challenge in practice – especially since time is limited and new priorities often arise.

Choose Your Priorities

The CEO’s first job is to not get too distracted by day-to-day issues that don’t impact the survival of the business. There are plenty of things you can focus on that might bring some improvement; your job is to choose a very few priorities that can make the greatest impact.

That doesn’t mean that you should ignore the many lower-priority issues you’ll face every day. However, you should focus enough of your efforts so that those few really critical concerns get all the attention they need.

As our business grew we found that our top priorities changed significantly. When the company first started I had to focus on building enough products by myself to meet demand, and finding ways to begin advertising without draining the family’s savings.

Today the challenges have shifted because the business is so much larger. Right now the priorities include maintaining the same good levels of customer service, working with suppliers to keep enough components in stock, and positioning the company for longer-term growth.

Find the Right People

If you’re starting a company that sells physical goods, finding the right people at first will amount to choosing your suppliers carefully. Our early priorities were to find one or two reliable suppliers, and to treat those businesses unusually well by communicating frequently and paying promptly.

We found it very helpful to call key individuals at those companies often enough to develop a good business relationship. Eventually I asked those contacts to recommend other suppliers in the marketplace who didn’t compete. I’d also ask if I could mention the referrer’s name as I approached those new suppliers. With those introductions from other suppliers, I found it much easier to get larger, lower-cost vendors to work with us.

As your company grows, you may soon reach a point where you can no longer handle manufacturing, fulfillment, and customer service by yourself. At this stage you’ll need to decide whether to hire your first employees, or find the right outsourcer.

Next: What’s an Outsourcer?

Advertising Your Products, Getting Started, Running Your Business

Advertise Online

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Advertise OnlineAs discussed in the article about making your website visible, there are important reasons to buy online advertising from Google* and others.

The benefits of online advertising can include jump-starting traffic to your website, and keeping you focused on the key terms you’ll need to emphasize on your web pages and in your ads so that you attract relevant visitors.

Different types of online ads that you can buy include:

  • search ads that shows text-based ads to people who are searching for related terms online
  • product listing ads that show very prominent product images and descriptions to people who are searching for items like yours
  • content network ads that show text and graphical ads to people who visit other websites that might be relevant to your product, or to people who fit demographic or behavioral characteristics that you choose
Ads in Google Search Results
Paid Ads Can Be the Most Visible Part of Search Results (Click to Enlarge)

Online ads use a bidding system that costs more when visitors click ads that appear for highly sought-after keywords. Your cost for a single click can range from a few pennies to many dollars.

This image shows examples of the ads that Google displayed when I searched for particular keywords. As you can see, the ads can really stand out compared to the unpaid (also called organic) results that Google also shows.

Focus on Advertising

The success of your online advertising will likely be critical to your business, and in the beginning you can expect to spend lots of time studying different techniques to improve the effectiveness of your ads.

Especially at first, you should keep a watchful eye on advertising effectiveness and spending, as small changes can have a big impact. We’ve heard stories of Google charging unwary advertisers huge sums of money in a matter of hours when improperly configured campaigns caused big expenses without the desired results.

It’s important to set realistic goals for the cost per conversion you’re willing to pay for each sale, and to constantly monitor your campaigns to meet your goals. In the case of our business, increasing online ad budgets to the point where we maximized profits – and avoiding the emotional decision of how much seemed “fair” to pay Google – had a positive impact on our bottom line.

Measure Everything

Before you begin advertising online, you should paste small pieces of tracking code provided by Google and the others on each page of your website to help report how different types of visitors are using your website.

Start by visiting the Google Analytics page (and the analytics pages of other advertisers you will use) to sign up for a free account, and to find the instructions for adding the provided code to your web pages. You will also want to paste different code for conversion tracking on the page that customers will see after they complete a purchase; this helps you to measure the effectiveness of your advertising expenditures.

If your website uses a content management system (CMS), there will likely be a free module to do nearly all the work for you. In the case of WordPress you can choose one of several free plugins that handle the job.

Advertising Considerations

Every product is different, and the nature of your business and competition will determine how easy it can be to create effective online ads. Special considerations can include:

  • Selling a new type of solution whose category is known to few people can make it tough to create effective search ads. In the case of our products, it’s been necessary to aggressively bid for keywords that generally describe our solution, and to run print ads in magazines that prospective customers are likely to read.
  • Products or services that target a limited geographic area can sometimes be easier to advertise online. I’ve found that it can be simpler to compete against other online businesses if your product is focused on a particular territory, since you can design ad campaigns and website pages that appeal to local customers.
  • Competition from large, national companies can make it a real challenge to create cost-effective ads. Your careful planning of targeted online ads – and the quality of information and ease of navigation that people experience on your website – must be better than the competition for you to survive.

Recommended Reading

Online advertising drives a large percentage of our sales, and I feel we owe some of our success to a $49 eBook The Definitive Guide to Google AdWords (Basic Edition)* by Perry Marshall. While I personally have not liked any of the add-on modules or other products I’ve tried from this author and his affiliates, I think this basic $49 eBook is worth many times its cost.

Early on I was persuaded to pay $500 for a credible-sounding consulting company to study our Google AdWords campaigns and suggest some improvements. It quickly became clear that because I knew my customers and had studied that $49 eBook, my own planning and analysis was much better than what the consultants could provide.

Test Your Alternatives

In addition to online ads, there are lots of other advertising options that you can try. These include advertising in print publications, sponsoring publishers’ email newsletters, and even direct mail.

My advice is to try everything you reasonably can, and to always test your results. In the case of more traditional advertising like print ads, we found it necessary to publish different coupon codes that offer readers a discount so that we can track the effectiveness of those ads.

We did discover one iron-clad rule to save money on marketing. More about that next.

Next: Steve’s Marketing Rule

* This is not a paid endorsement.

Running Your Business, Serving Customers

What’s an Outsourcer?

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What's an Outsourcer?As your business grows, you could find there’s too much work to handle while keeping your day job. And, if you sell physical goods, you might run out of room to store and prepare those items at home.

At this stage, your choices can come down to enlisting family members or hiring employees and perhaps renting warehouse space, or finding an outsourcer (also called a fulfillment company).

About Outsourcers

An outsourcer can handle warehousing of your products, assembly, packaging, fulfillment, and most customer service requests. Depending on your product, you may still need to provide frequent guidance about handling individual customer service issues.

The outsourcer will likely charge a small fixed fee every month (say, for phone equipment) plus variable fees that depend on the number of items assembled and shipped, and the number of customer calls answered.

A good outsourcer can bring several benefits.

  • You’ll have vastly fewer management and record keeping headaches compared to hiring employees and renting warehouse space
  • Because most of the fees will depend on the quantity of items shipped, you’ll have far fewer fixed costs to worry about as revenues change
  • The outsourcer should already have trained staff and nearly all the equipment you’ll need, so setup and training could be much easier

However there are also some disadvantages.

  • Should the outsourcer’s staff, business terms or work quality change significantly you could find it difficult to replace the service
  • Outsourcers work for profit, so they’ll almost certainly cost more in the long run than handling the work in-house

Your Decision

Your choice of outsourcer – and whether to use an outsourcer at all – is absolutely critical to your business. Start by searching online for fulfillment companies that are close enough that you can help with setup, training, and taking physical inventory a few times per year.

It’s essential to meet with management at each potential outsourcer, tour the facility, and get a feeling of whether you’ll get the attention you need.

Most importantly, get at least three references of other businesses who use each outsourcer candidate. Call each business owner, and ask that they, too, give you the name of another company you can call for a reference.

Prepare a list of questions to ask each reference and write down the responses. It pays to ask as many questions as time allows, for example:

  • How did you first find out about this outsourcer?
  • How long have you worked with them?
  • How many of your shipments and calls do they handle per day?
  • What can you tell me about the quality of their work in general?
  • How promptly have they fulfilled your orders so far?
  • How well do they communicate with your customers by phone? Email?
  • How is the quality of their communication with you?
  • What can you share about their management, and any staff turnover?
  • What have been your biggest surprises working with this company?
  • Have you worked with other outsourcers? How do they compare?
  • Is there anything else I should know about the outsourcer?
  • Are there other companies I might call who have used this outsourcer?

Should you find the right candidate, be sure that you both sign a letter that covers obligations and costs, confidentiality, protection of customers’ personal data, termination, and other critical points.

Use of an outsourcer isn’t for everyone. One of my former coworkers created a successful business by first bringing on family members, then renting a warehouse, then hiring full-time staff and quitting his day job.

Next, we’ll cover strategies to manage your money as your business grows.

Next: Manage Your Money

Running Your Business, Your Money

The Inventory Trap

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Inventory TrapOne of the most bewildering aspects to managing a business that stocks and sells physical goods (as opposed to selling only electronic downloads, or items drop-shipped directly from manufacturers to customers) is understanding the huge importance of inventory that you keep on hand to sell.

It’s entirely possible that at some point your accounting software will tell you that your business is making a healthy profit, yet there’s no cash on hand to pay your bills. How is this possible?

It can happen because the finished products you buy and stock to resell (or the components that you assemble) are likely to tie up more and more of your profits, and perhaps personal savings, as your business grows.

This could put you in a position where you don’t have the cash you need to pay suppliers or even the IRS – because so much money is tied up in physical inventory on your shelves. And the concerns don’t end there.

  • As your business grows you’ll likely need to keep an ever greater value of inventory to maintain a constant number of days’ supply, since running out of products will lose customers and waste advertising dollars.
  • Many local property tax districts require you to file a report – separate from your home appraisal – showing the value of your business inventory at the end of each year so that they can collect additional property tax.
  • Once the inventory you keep on hand grows to a value that you can’t easily replace, you should seriously consider buying business insurance so that fire, theft, and accidents won’t shut you down.

Avoiding the Trap

Many online stores limit their inventory costs by drop shipping products directly from manufacturers to their customers, without ever handling the products themselves. While drop shipping can eliminate inventory costs, there are several disadvantages.

  • You’ll likely pay more for products that manufacturers drop ship to your customers, compared to items that you buy for stock.
  • You’ll lose control over the quality and promptness of the shipments that manufacturers send directly to customers.
  • Your website could have too little differentiation with other retailers who likely publish similar descriptions, and offer the same stock status and delivery times, provided by manufacturers who drop ship.

In the case of our business, we chose to ship our own manufactured goods and stock items, and to make it a priority to proactively manage inventory.

Next we’ll discuss some of those strategies to control inventory costs.

Next: Control Your Inventory